State of Celo Q1 2024

Key Insights

• SocialConnect’s new registered identifiers increased by 44% QoQ to 1.3 million. SocialConnect is a payments SDK by cLabs that enables wallets to map a user’s blockchain address to a social identifier in a privacy-preserving manner.
• Native USDC and USDT integrations on Celo went live in Q1, enhancing payments, DeFi, and other use cases. Subsequent proposals were passed to enable users to pay transaction gas fees in native USDC and USDT.
• A proposal was passed to earmark 1.6 million cUSD and 700,000 CELO to fund a Celo Public Goods program for H1’24. So far, the program has given grants to the Prezenti and Celo Camp accelerators, regional DAOs, and a Retro-PGF program.
• cLabs proposed to leverage the OP Stack for Celo’s upcoming transition to an Ethereum L2. The next steps include community and governance calls and an onchain vote. Pending approval, the launch of the CEL2 testnet is anticipated for the summer.

Primer

Celo (CELO) is a carbon-negative, mobile-first, and EVM-compatible Layer-1 network in transition to an Ethereum Layer-2. Celo is focused on real-world blockchain use cases such as payments and regenerative finance (ReFi). After raising $36.5 million in two private fundraising rounds, Celo mainnet launched on Earth Day in 2020. Soon after, a public sale for Celo’s native token CELO raised $10 million on CoinList. The development and growth of Celo’s network and ecosystem were initially led by cLabs and the Celo Foundation. While these entities are still involved, Celo’s development and growth have become more decentralized and community-driven, with participation from a globally distributed group of projects and DAOs.

In 2023, Celo began its transition to an Ethereum Layer-2 (“CEL2”), which is estimated to launch in 2024. Developers are currently leveraging the OP Stack, although the final decision on which stack to use is currently pending a community vote. Modifications will be made to maintain several of Celo’s current properties, including 1-block finality, reorg resistance, gas payable in stablecoins and community tokens (USDC, USDT, cUSD, and Good Dollar), and low transaction fees.

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Key Metrics

Financial Analysis

As a whole, the crypto market continued to climb in Q1. CELO was no exception – its circulating market cap increased by 55% QoQ to $638 million. However, CELO’s growth was slightly outpaced by other tokens, as its market cap rank fell from 130th to 138th QoQ.

Celo’s quarterly revenue (gas fees collected by the protocol) increased by 7% QoQ to 66,000 CELO. However, considering CELO’s price appreciation, its revenue in USD grew by 77% QoQ to $61,000. In addition, Celo’s average transaction fee in Q1 was $0.002. Transaction fees on Celo are designed to be low to support real-world use cases.

At the end of Q3, the Gingerbread Hardfork was implemented, introducing a new system for revenue distribution. Inspired by Ethereum’s “ultrasound money,” the system was dubbed “Ultragreen Money.”

Under the new system, 20% of the base fee is allocated to a new Green Fund. The Green Fund, initially controlled via a multi-sig, received the existing assets in the Celo Carbon Offset Fund. The Offset Fund aims to turn assets into onchain regenerative finance (ReFi) initiatives, such as buying carbon credits.

The new system also burns the other 80% of each transaction’s base fee. Tokens allocated to the burn accrue in a contract. Anyone can call a function to then actually burn the tokens at any time. On top of the base fee, transaction senders can add a tip, which is distributed to the block producer.

Gas fees can be paid in any ERC-20 token approved by onchain governance. Any fees paid in ERC-20s are transferred to the Green Fund as they are, but they are then converted to CELO in order to be burned. Almost 95% of Q1 transactions used CELO as the gas currency, with most of the other transactions using cUSD as the gas currency.

In Q4, over 25,000 CELO was burned. For comparison, almost 2.5 million CELO was minted to distribute as staking rewards. Burned CELO increased slightly QoQ, causing CELO’s inflation rate to decrease by 0.1% QoQ to 1.41%. Note that this inflation rate measures the rate of staking rewards less the rate of tokens burned, relative to the genesis supply total of 700 million tokens. The rate of staking reward issuance is set to remain at 1.43% until 2035, when it will then begin decreasing and eventually go to zero.

Beyond validator rewards, CELO also experiences inflationary pressure from genesis supply unlocks. At the end of Q1, 71.5% of CELO’s genesis supply was liquid. The genesis supply here excludes staking rewards and totals 700 million tokens. In Q2’24, another 1% of genesis supply will unlock across the team and advisors, as well as community and operational grants buckets.

Network Analysis

Usage

Average daily transactions fell by 45% QoQ to 319,000. However, excluding inscriptions-driven spikes in late November, average daily transactions increased slightly QoQ.

Average daily active addresses decreased by 31% QoQ to 31,000. The increase in Q4 and subsequent decrease in Q1 was largely due to play-to-earn (P2E) game Battle Left Center Right (BLCR).

After deploying to Celo in mid-September 2023, BLCR ceased operations in early February 2024. While live, BLCR averaged 58,000 daily active addresses on Celo. While active addresses in Q1’24 returned to Q3’23 levels following BLCR’s termination, they remain well above Q1’23 levels, up over 1,200% YoY.

This longer-term growth has largely been driven by GoodDollar, which averaged 48,000 daily active addresses in Q1, an 11% QoQ decrease. GoodDollar is an onchain universal basic income (UBI) experiment. The protocol mints and distributes the G$ token on a daily basis to verified global smartphone users. G$ is partially backed by a reserve pool, which lives on Ethereum. Unfortunately, GoodDollar’s reserve pool was exploited in mid-December, when a malicious actor withdrew cDAI and minted 14 billion G$ tokens, increasing supply by around 233%. The malicious actor sold around 1 billion G$ on Celo and Fuse DEXs, causing its price to decrease by 95%. A community working group was formed in Q1 to explore strategies to improve GoodDollar liquidity and restore its reserve.

Average daily new addresses increased by 18% QoQ to almost 15,000. The weighted average one-month retention rate decreased by 44% QoQ to 12%. However, Q4’s figures were elevated by sticky new addresses that mostly interacted with BLCR, especially from the October cohort.

Security and Decentralization

CELO staked decreased by 24% QoQ to 197 million, representing 40% of the supply eligible to be staked. However, with CELO’s price appreciation, total staked in USD increased by 15% QoQ to $237 million. Meanwhile, the number of active validators on Celo remained at 110 in Q4. Several validator operators run more than one validator node on the Celo network. At the end of the quarter, there were around 66 unique validator operators.

In Celo’s upcoming transition to an Ethereum L2 (discussed in further detail in the Upgrades and Roadmap section), Celo’s validator set will become a decentralized sequencer set. In addition to running an updated client, validator operators will either need to run an Ethereum node or have access to a trusted one. The sequencers will enable Celo to maintain its 1-block finality secured by CELO stake, while also leveraging a data availability layer and Ethereum for stronger, albeit less frequent, finality guarantees. If validators share divergent blocks on the Celo and data availability layer, they’ll be slashed in order to avoid sequencer-caused block reorgs. The Celo team is exploring the exact design details to mitigate Ethereum reorgs which would result in Celo reorgs.

Upgrades and Roadmap

In mid-July, cLabs posted a forum proposal to transition Celo to an Ethereum L2 (“CEL2”). The post proposed to initially leverage the OP Stack and EigenDA for data availability. Modifications would be made to maintain several of Celo’s current properties, including 1-block finality, reorg resistance, and low transaction fees. As noted above, Celo validators will transform into sequencers, making Celo one of the first L2s with a decentralized sequencer set.

At the end of July, the proposal passed a temperature check. Then, at the end of Q3, the Gingerbread Hardfork was completed. At the end of October, cLabs posted an updated CEL2 roadmap. The first item on the roadmap was the creation of a framework for selecting an L2 stack, which was released at the end of November.

After posting the original proposal, several other teams developing Layer-2 stacks proposed for Celo to use their stack instead of the OP Stack, including the Polygon CDK, zkSync’s ZK Stack, and Arbitrum Orbit. In Q1, members from Matter Labs and the Optimism Foundation posted follow-ups to their proposals. Among other items, both posts offered grants to Celo developers for choosing their stack. Matter Labs offered around $2.7 million and the Optimism Foundation offered 2 million OP upfront ($7.4 million as of March 31, 2024) and 4.5 million OP vested over three years with milestone-based unlocks ($16.6 million as of March 31, 2024).

Near the end of January, cLabs shared an update on its progress with each of the four stacks (Optimism, Polygon, zkSync, and Arbitrum). After quarter end, cLabs proposed to leverage the OP Stack for the L2 migration.

Ecosystem Analysis

DeFi

Celo’s DeFi TVL increased by 48% QoQ to $202 million. Stablecoin protocol Mento’s TVL grew by 51% QoQ to $124 million. Mento mints the stablecoins cUSD, cEUR, cREAL, and eXOF, which are backed by a reserve featuring CELO, DAI, USDC, EURC, and other digital assets. In Q1, Mento added Tether stablecoins (USDT and EURT) into the reserve. With the majority of its reserve (and thus TVL) in CELO, Mento’s TVL increase was largely driven by CELO’s 52% QoQ price appreciation. Mento Labs also announced a $39,500 audit contest and the integration of RedStone oracles.

Among top Celo DeFi protocols, Uniswap led in TVL growth, up 89% to $46 million. Before Uniswap’s Celo integration in Q3’22, Ubeswap was the foremost DEX on Celo. Its TVL peaked in late 2021 at over $83 million TVL, but since then, it has gradually decreased to $3 million.

Ubeswap will look to reverse this downward trend with the passing of UIP-16. The proposal elected three community members as new DAO administrators. The previous DAO administrators had become inactive in recent months. The new DAO administrators plan to launch V3 liquidity, cross-chain swaps, and a launchpad. UIP-17 was subsequently passed to migrate the UBE token to a new contract. Existing UBE holders could migrate at a 1:1.5 ratio; however, the total supply increased at a 1:2.5 ratio. The remaining portion of the new UBE supply will be used for partnerships, marketing, liquidity incentives, and the team.

Aave may soon launch on Celo, potentially joining other blue-chip DeFi protocols. After a successful temperature check in August, BGD Labs completed its technical analysis of Celo’s suitability in supporting an Aave V3 instance. It found that Celo is “an acceptable network candidate in regard to technical requirements.” The next steps include a risk assessment followed by a final Snapshot vote to approve the deployment.

ImmortalX, Celo’s leading perps exchange, conducted its first airdrop program at the end of the quarter. It distributed $50,000 to 318 eligible participants. ImmortalX averaged $135,000 daily volume in Q1, a 151% QoQ increase.

Stablecoins and Payments

Celo’s stablecoin market cap grew by 10% QoQ to $61 million, largely driven by over $10 million cUSD minted on February 17. Ten million cUSD was minted per Celo Governance Proposal 115 to distribute to the Celo Community Treasury.

Unlike many other networks, Celo users can pay gas fees in approved stablecoins. This ability enhances the user experience, especially in real-world use cases. Furthermore, Celo’s stablecoin market cap is largely made up of native stablecoins like cUSD and cEUR rather than USDT or USDC, as seen in other top networks.

The market cap makeup may change with the integration of native USDC and USDT, which both occurred in Q1. Native USDC went live near the end of February. At the end of March, a proposal was passed to enable native USDC as a gas currency. Soon after, native USDT went live on Celo. The proposal to enable native USDT as a gas currency passed after the quarter’s end. Lastly, Angle launched its stEUR asset on Celo at the end of February.

In mid-September 2023, web browser Opera launched stablecoin wallet MiniPay, powered by FiatConnect and payments SDK SocialConnect. MiniPay is natively integrated into Opera’s mobile web browser Opera Mini, one of the more popular mobile browsers in Africa with an 11% market share. After reaching 1 million users in mid-February, MiniPay surpassed 2 million users a month later. SocialConnect has witnessed similar growth, with 1.3 million new registered identifiers in Q1, a 44% QoQ increase.

Other payments-related events from Q1 include Ammer Wallet’s integration of Celo-native USDC and USDT (which enabled physical payments via Ammer Card), Hurupay’s introduction, Valora’s new USDC swap feature, and GoodDollar’s G$ bonuses in celebration of its one-year anniversary on Celo.

ReFi

Regenerative finance (ReFi) merges DeFi with regenerative economic principles to tackle environmental and social issues using blockchain technology. Since its launch, Celo has been committed to creating a positive social impact. As such, Celo is one of the leading ecosystems for ReFi projects, including GoodDollar, impactMarket, Toucan, GainForest, EthicHub, and more.

In Q1, several ReFi and RWA-related projects launched on Celo, including:

• Centrifuge’s Celo integration: Centrifuge is a platform for issuing RWAs as tokenized assets. It integrated with Celo near the end of January. Its first RWA offering on Celo is a tokenized treasury bill pool via Anemoy Capital.
• ZOTH’s launch: RWA platform ZOTH launched in early March, initially offering a pool of tokenized trade receivables from emerging markets. ZOTH participated in Celo Camp Batch 8 and plans to bring other assets onchain including sovereign bonds, treasury bills, and more.
• Toucan’s CHAR launch: Onchain carbon credit protocol Toucan launched its CHAR product in early March. CHAR is a liquid market for biochar credits.
• Jia’s USDC Pool Launch: Onchain microloan provider Jia launched a Celo-native USDC via Huma to bring capital to entrepreneurs in Kenya and the Philippines.

At the beginning of Q3, the Celo Foundation commissioned carbon offsetting NFT Celosapien from Ecosapiens. The NFT is dynamic, evolving to reflect Celo’s carbon offset progress. The Celosapien reached its final evolution near the end of January. At the end of Q4, Celo’s lifetime net carbon footprint stood at -6,339 tons of CO2, with offsets largely facilitated by Toucan and Wren.

Other

Other Q1 developments across infrastructure, NFT, and other sectors include the integration with onchain data indexer Covalent, the integration of Rarible’s NFT development toolkit, the launch of onchain reputation protocol Talent Protocol’s V2, the integration of Wanchain’s cross-chain bridge, and the launch of OpenName’s name service.

Development and Growth

Celo averaged 311 weekly active developers building projects in Q1, a 0.5% QoQ increase. This ranks Celo 10th among ecosystems. As highlighted in Electric Capital’s 2023 Developer Report, Celo’s ecosystem witnessed 1,641 new developers in 2023 and was the only ecosystem among the top 15 to grow its total developer count in 2023. The Celo Foundation, cLabs, and other organizations will look to continue growing Celo’s ecosystem via hackathons, grant programs, and other initiatives. Notable initiatives from Q1 include:

• Celo Camp Batch 8 Winners: Celo Camp is an eight-week virtual accelerator program created by the Celo Foundation and Upright in 2020. Batch 8 exclusively featured projects building using MiniPay’s wallet on Celo. There were 17 teams selected out of over 300 applications from over 60 countries. Winners were announced in early January, with BitGifty taking home the top prize of 10,000 CELO. Lockie, Shiga, and Yuki also received prizes. Celo Camp received a grant of $325,000 in cUSD and 100,000 CELO to enable Cohort 9, which will continue to focus on MiniPay.
• Galxe and Layer3 integrations: Galxe and Layer3 both integrated with Celo in February to facilitate onchain quests. Galxe quests (12,000 community followers) have incentivized bridging to Celo via Wormhole. Layer3 quests (73,000 quest participants) have included bridging to Celo via Squid, swapping on Uniswap, and sending payments on Valora.
• Public Goods Funding: Proposal 157 was passed to earmark 1.6 million cUSD and 700,000 CELO to fund a Celo Public Goods program for the first half of 2024. Projects can apply for funding, with funding decisions made by CELO holders via Snapshot. So far, the approved grant requests include Celo Camp (325,000 cUSD and 100,000 CELO), Prezenti (343,000 cUSD), Celo Africa (248,300 cUSD), Celo Europe (158,250 cUSD), and Celo Thailand (37,750 cUSD). The Public Goods Funding program will also include other elements such as retroactive public goods funding (RPGF). Its first such program, CeloRPGF0, was announced in February with up to 250,000 for distribution.
• Build with Celo Hackathons: Celo Developers announced the return of Build with Celo Hackathons, beginning with an AI-focused hackathon in April in partnership with AI agent protocol Autonolas. An Autonolas proposal was passed to incorporate its registries onto Celo at the end of February.
• And even more, including participation at Africa Tech Summit Nairobi, EthDenver and side events such as unStable Summit and Pragma Denver, Token2049 Dubai, hosting an event with Rarible during NFT.NYC, prize tracks in the ETHGlobal London and ETH Seoul hackathons, Celo Europe’s announcement of the Celo Gather conference in late May, and the CodeJam hackathon hosted by Celo Kenya and Celo Africa DAO.

Closing Summary

Celo’s capabilities to support payment and other real-world applications took a notable stride in Q1 with the integrations of native USDC and USDT. Subsequent proposals were passed to enable users to pay transaction fees in those native stablecoins. One of the standout payments applications on Celo is Opera’s stablecoin wallet MiniPay, which is powered by payments SDK SocialConnect. SocialConnect witnessed 1.3 million new registered identifiers in Q1, a 44% QoQ increase.

Celo continued research and development toward its upcoming transition to an Ethereum L2. After the quarter ended, cLabs proposed to leverage the OP Stack. The next steps include community and governance calls and an onchain vote. Pending approval, the launch of the CEL2 testnet is anticipated for the summer.

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